GOVERNMENT S

REMEDIES

POWERS OF THE BIR

Assess and collect all taxes, fees

and charges

Enforce all forfeitures, penalties and

fines in connection therewith

Power to interpret tax laws and decide tax

cases

Includes interpretation of tax laws, deciding on

disputed assessments, refunds of internal

revenue taxes, other matters arising from the

NIRC

Since the CIR has exclusive and original JD to

interpret tax laws, taxpayers acting in good faith

should not be made to suffer for adhering to

general interpretative rules of the Commissioner

interpreting tax laws, should such interpretation

later turn out to be erroneous and be reversed by

the Commissioner or this court.

Power to obtain information and to summon

and examine

Ascertain the correctness of any return

Making a return when non has been made

Collecting any such liability

Evaluating tax compliance

Examine any document which may be relevant

or material to an inquiry

Obtain information from a third party in relation

to an investigation or audit of a taxpayer

Summon the taxpayer or any person holding

the records of the taxpayer to appear before

the CIR and produce documents

Take testimonies of the persons concerned

Cause BIR employees to canvass around and

inquire on persons who may be liable for any

internal revenue tax

Conduct inventory taking as a basis for

determining the taxpayer internal revenue tax

liabilities

Place the business of any persons under

observation or surveillance

Also authorized to:

Divide the PH into different zones and

compute the fair market value

The rule on the best evidence obtainable

applies when a tax report is required by law for

the purpose of assessment and it is not

available or when the tax report is incomplete

or fraudulent.

Instances when bank deposits may be

examined by

A decedent to determine his gross estate

Any taxpayer who has filed an application for

compromise based on financial incapacity

Pursuant to an international convention or tax

agreement to which the PH is a signatory

Authority to delegate power

The CIR may delegate the power to assess

taxes to his subordinates

But the CIR cannot delegate the power

1. To recommend the promulgation of RR by

the Secretary of Finance

2. To issue rulings of first impression or to

reverse, revoke or modify any existing ruling

of the Bureau

3. To compromise or abate any tax liability

4. To assign or reassign officers to

establishments where excise tax articles are

produced or kept

Authority to issue deficiency tax assessments

Consists of:

1. Self-assessment= when the taxpayer computes his own liability, files his

return and pays the tax based on his computation

2. Deficiency assessment = upon discovery of the BIR that the self-assessment

was either deficient or when no return was made by the taxpayer

To be valid, the assessment must be in writing and must inform the

taxpayer of the law and the facts on which the assessment is made.

Notices must be served either by: 1.) personal service = preferred mode of

service 2.) substituted service 3.) service to the tax agent shall be deemed

service to the taxpayer.

After filing of ITR, the BIR shall assess within

3 years after the last day prescribed by law

for the filing of return

Exception on prescriptive period

1.) False or fraudulent return

2.) Failure or omission to file a return

3.) Waiver of statute of limitations in writing

In computing the years, months and days, follow

the rules under the Administrative Code of 1987,

not the Civil Code, where a year shall be

understood to be 12 calendar months, months as

30 days (CIR v. Primetown)

WRONG RETURN v. AMENDED RETURN

If the taxpayer files an amended return, which is

substantially different from the original return, the

period of prescription should be counted from the

filing of the amended return

If the taxpayer files the wrong return, it is as if he

filed no return at all.

FALSE RETURN v. FRAUDULENT RETURN

False return = implies deviation from the truth. It is

usually due to mistake, carelessness or ignorance.

Fraudulent return = implies intentional or deceitful

entry with intent to evade the taxes due.

PERIOD TO ASSESS IS BOTH WITHIN TEN YEARS

UPON DISCOVERY. The difference however is that,

fraudulent return will be subject to 50% surcharge.

Fraud requires that it be actual, not merely

constructive.

Waivers

Why go for a waiver?

It is sometimes advisable to do so to allow the BIR to fix

their jeopardy assessments (which are usually excessive)

The taxpayer and the government may extend, by mutual

agreement, in writing the prescriptive period for the

assessment and collection of taxes.

A waiver of statute of limitations under the NIRC to a certain

extent, is a derogation of the taxpayer s right to security

against prolonged and unscrupulous investigations and

must therefore be carefully and strictly construed. (Phil

Journalists v. CIR)

Requisites of a valid waiver

The waiver must be in proper form prescribed by RMO-

20-90

The waiver must be signed by the taxpayer himself or his

duly authorized representative

The waiver must be duly notarized

The CIR or the revenue official authorized by him must

sign the waiver indicating the BIR s acceptance and

agreement to the waiver

Both the date of execution by the taxpayer and the date of

acceptance by the BIR should be prior to the expiration of

the period of prescription or before the lapse of the period

agreed upon in case a subsequent agreement is

executed.

The waiver must be in 3 copies

What is the waiver is invalid (ex: the CIR did

not sign it ) but the taxpayer still paid within

the extended period provided by the waiver?

Taxpayer is estopped from questioning the

waiver.